City hikes water rates with eye toward future

Water-sewer rates to climb 30 percent over next 3 years

BRADLEY OLSON, HOUSTON CHRONICLE

Published 5:30 am, Wednesday, April 21, 2010

The City Council on Wednesday raised water and sewer rates by nearly 30 percent on an average single-family household, among the largest increases in Houston's history and one that places the city's rates at a higher level than many major U.S. municipalities.

The increases for single-family homeowners will be phased in over three years, bringing the bill of an average single-family household using 6,000 gallons of water a month from $47 to $60 after the rate hike is fully implemented.

About 12.5 percent of the 27.7 percent increase will take effect June 1. The remaining 15 percent will be phased in every April 1 for three years beginning in 2011.

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“I am absolutely convinced that we did the right thing today for the citizens of today and future generations in the city of Houston,” said Mayor Annise Parker.

The mayor compared the “tough vote” to eating “a healthy dose of vegetables,” something she promised the city has only begun to do as the budget process heats up for next year.

Parker and City Council are confronting a projected $140 million shortfall for fiscal 2011, a gap that will be unaffected by the water rate increases.

The mayor has pledged not to raise taxes to make up the difference, instead turning to difficult spending cuts such as reducing library hours, increasing retiree health care premiums and possibly furloughing city employees.

Three opposed increase

Council members Mike Sullivan, Oliver Pennington and C.O. Bradford voted against the plan. Pennington, Bradford and several other council members expressed concerns that the rate hikes would violate city charter provisions limiting annual rate increases to a maximum of the combined rate of inflation and population growth.

Pennington, a former partner at Fulbright and Jaworski specializing in municipal finance, said the legality of the rates could be decided by a court, suggesting a lawsuit against the city for the increase was likely.

“The amount of the increase in this environment is very unfortunate and unfair,” he said.

Parker and City Attorney Arturo Michel said the increases would not violate those charter provisions, passed by voters in a 2004 election, because the increases are vital to the health of the city's water sewer system.

Provisions exist in the charter, Michel said, allowing council to enact increases to exceed those limits if they are necessary to meet bonding and contractual requirements or to restore the system to health.

Michel said the city is preparing to pre-empt any lawsuits by filing a “rate validation lawsuit” that will seek a district court judge's approval of the rate hikes given the language in the charter.

“To reassure everyone and make sure that there's no cloud on our ability to go forward ... we are going to go to a judge pre-emptively and say, ‘Bless this,' because we don't want to have any doubt for our bondholders that we can accommodate this rate increase,” Parker said.

The ordinance also will allow the city to raise rates annually according to the producer price index, a measure of inflation that more closely follows cost increases to the water-sewer system, as opposed to previous increases that were tied to inflation based on costs to consumers.

Among the 11 council members who voted for the plan, many expressed a willingness to stablilize the water-sewer system permanently, so future administrations do not face significant water rate increases as soon as they take office, as did Parker, former Mayor Bill White and other previous mayors.

Long-term view

“It's important that we take this system and make it a more equitable system,” said Councilman Edward Gonzalez, who successfully pushed for increases that would force all users — single-family, apartment and commercial — to pay what it costs for the city to provide water and sewer service. “It's really critical for the long term sustainability for our water system.”

Had they failed to raise rates, many noted, the system likely would face a downgrade in its debt, increasing costs and leading the city to continue running a deficit in the water-sewer utility. This year that shortfall is expected to exceed $100 million.

Once the rate increases take effect, it will mark the end a longtime city subsidy of the cost of delivering water to citizens.

No council member could explain why the subsidy remained in effect for so long, but several asserted that the rate increase was an important change they hoped would lead Houstonians to see water as a commodity.

“The core responsibility we have in this city ... is to make sure that when people turn on their faucets, we provide them with safe drinking water,” Councilwoman Sue Lovell said. “It's a commodity you have to pay for. We never promised we would give it away. We've been doing that a while and we're not going to do it anymore.”

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